Discovery Tracks Down Big Profit in Q2

Early Tuesday, Discovery reported revenue of $1.71 billion and earnings of 71 cents a share, beating expectations once again and finding a financial trajectory that’s eluded other cable networks.

That topped the $1.65 billion in revenue and earnings of 44 cents a share the company earned during the corresponding period last year. It also matched consensus analyst estimates of $1.71 billion in revenue and handily beat expected earnings of 54 cents a share.

“Discovery posted a solid quarter of growth and financial results by investing in premium and diversified content that fuels the passion of superfans on pay-TV, free-to-air, direct-to-consumer and digital platforms,” Discovery CEO David Zaslav said in a statement accompanying the earnings. “Our differentiated portfolio of nonfiction, sports and children’s content in more than 220 markets positions Discovery for continued growth and shareholder value creation in the months and years to come.”

Discovery began a massive buyout plan to reduce its workforce that will incur $40 to $60 million this year as its ratings aren’t what they used to be. It faces the same existential concern as many other large cable networks: cord-cutters reaching their breaking point with the ever-increasing cost of an ever-expanding bundle. That’s sparked interest in lower-cost “skinny bundles,” such as Dish Network’s SlingTV — and put pressure on Disney’s erstwhile cash cow (and the most expensive cable channel by carriage fee), ESPN.

Those fears have also weighed on Discovery’s stock. Its shares closed Monday at $24.77, not far off its 52-week low of $23.66. But as it has done in three of the last four quarters, Discovery posted a pleasant earnings surprise, boosted by 10 percent growth at its U.S. networks and a stock buyback of $377 million in shares. The home of “Shark Week” did all that while going against the tide of so many other cable networks.

Discovery’s aggressive international expansion in recent years has also come with drawbacks, as a strong dollar and the “Brexit” vote in the United Kingdom hindered performance in non-U.S. markets. In a statement after the vote, Discovery highlighted its operations in 220 markets and touted its currency hedging protocols as another layer of insulation to protect against swings in the foreign exchange rate.

“We will work closely with U.K. and E.U. leaders to successfully navigate this change and find new opportunities to shape our future,” the statement read. “In the short-term and medium-term, our currency hedging program will significantly minimize the foreign exchange impact of the Brexit vote on our financial performance.”

Discovery has also made inroads into new media, notably backing scripted digital production company New Form Digital alongside Brian Grazer and Ron Howard. One of New Form’s newest series, “Miss 2059,” which airs on Verizon’s Go90 network, hosted one of the most popular attractions at this year’s VidCon — an online video confab where bands of tweens flock to household names just a few years older than them who you’ve never heard of.

Discovery will hold a conference call at 8:30 a.m. ET to discuss the earnings report.